canola, how high will it go

[caseman]

I see we have $9.00 canola now,Viterra MJ.

Any thoughts and how much more it can climb? I think I would dump all mine if it hits $10.

[charliep]

What is your time frame? Will note that a late May/June DDC would get close to $9.50/bu.

Your risk factor as you push into the spring is south america soybean production and what could be an increasingly heavy Canadian canola supply as the full force of this years humungus production sinks in and budgets that tell everyone canola will be the best crop to grow in 2010. I would be pricing at something under $10/bu depending on how much sold to date, cash flow needs and risk assessment/willingness to speculate. Nothing wrong with selling some at the current price.

[DogPatch]

We should just pick a price that we're happy with and dump it. Remember it can heat in the bin before we'll see $11.00 and we'll see 8 again before we see 12

For all its faults the CWB does had a bit of a plus for us. Look at what the open market price is for Wheat. You don't pay many bills if you have to dump it all in the fall. Most of us aren't anywhere near enough to the markets to take those prices of the day that everyone talks about. Those prices are only to get people to haul to fill a unit train or such.

Pick a price and do it!

[charliep]

An interesting comment about selling in the fall.

Will start off with the fact CWB limits delivery in the fall and farmers get only get 60 % on unload.

If you look at the US farmer, it is interesting that quite often, the October/November price for spring wheat is equal to the 5 year average. Obviously, US farmers can't dump 100 % off the combine but there is enough discipline that they don't sink market prices either in the fall. I would make the same observation for canola.

<a href="http://www.ers.usda.gov/data/wheat/YBtable18.asp">US average prices</a>

Agree with the comment about picking a price and selling some. Talked to a guy over the week who had a 1,000 tonnes (actually more) and wanted to pull to pull trigger on the whole wad at a target. I have to comment I wish I had the money to do this but from a practical side, suspect it will be impossible. I still like the strategy of selling chunks at key times/trigger points during the year but thats me.

[charliep]

paragraph 3 should be annual average. sorry about. Just highlighting a data series that compares weighted average prices across months.

[DogPatch]

Yes, you can't deliver all your grain off the farm, and Yes the CWB is only calling for 60%, but even still certain farmers seem to be able to get all of their grain hauled out either during harvest, or before some farmers are even called. I don't know if its the better managers, or the bigger whiners that haul first, but atleast with that god awful (I mean that) quota system atleast everyone had a fair chance to haul something.

I'm not pro CWB, but with a pool price we're not trying to kill each other trying to haul our Durum on the one week of the year when its at Highest Price that we all hear about all the time.

Atleast if we do sell in October, we can expect to see something more. NEVER will we see that happen if the Big Grain take over.

[caseman]

I usually like to sell canola before seeding time. I am about 25 % sold on canola right now.

I have the advance on canola which has to be paid by Sept 30 i think.

$9.50 would be tempting as I have sold a lotof canola for $5-$6 over the yrs
and hardly any over $9.

I guess I have only grown canola for 12 yrs or so now.

[cityguy]

That's an interesting table that Charlie had. Would be nice if we could see the actual bushels marketed in each time period. Should note that Oct/Nov wouldn't be considered harvest in spring wheat in the US. It's more an August/Sept deal, save for this year. Also - don't know if the deferred prices are net of storage/delayed pricing/drop charges?

[vvalk]

Dogpatch
What you are forgetting is that most fall deliveries done of wheat in the US or non board crops in Canada are done on contracts signed up the prevoius fall or winter at much higher rates. Especially over the last few years. 2 yrs ago US farmers were signing up durum contracts well over $10 to $11 a bus with act of God clauses while we got $8 a bus for 76% of the crop. Last yr as well as our pool price dropped $4 a bus US farmers priced high priced contract over the prevoius winter. Far less risky to be able to pre price grain that is my biggest beef with the board.

[bucket]

Dogpatch

What 60% are you talking about?

And what do you call grainflo where some get to haul 100% and others 40% by just the luck of the draw.

Board supporters have been pretty quiet about the cwb creating a two-tiered system in western canadian.

[mbratrud]

I think once the harvest pressure (tough stuff) has backed off started already I think. Basis levels could improve a bit making $9.50 achievable by seeding. But there are risks, Brazil's Soybean production estimates were just raised and Argentina is seeing favorable weather, this could have some impact in coming months. Put options are a good strategy March $410 puts are trading for a reasonable price this is good protection if you want to wait awhile longer to sell. Or put yourself out of your misery and sell at $9, which could very well be right near the top for the winter anyway. There is going to be a large carryout, and the perception is growing that acres of Canola will again get larger. Just my 2 cents

[furrowtickler]

Canola carry over will not be large, in fact the carry should be very tight by August. 60% or more of the on farm stocks must move very shortly b/c of moisture/storage conditons. Also a relativly big percentage of last years canola was contracted. Remember that Alberta's crop yeild was far below the prev. two years. Every day there are more and more confirmed reports of heated canola in bins, canola in bags that is frozen solid. For these reasons I do not beleive that the ending stocks will be as they say. It is going to be a very long winter for some.
Watch basis levels and I think $9.5-$9.75 is possible. We locked in a $25 basis on clearfeild in Oct. that trigered $10/bus last week. Pricing oppertunities will be there throughout the winter.

[charliep]

I note the July closed yesterday at $433.90/tonne. Will see what happens today but yesterday, you could have had $9.50/bu for May/June delivery with a $16/tonne basis. To achieve the magic $10/bu across the prairies, you will have to have futures over $460/tonne some time, a rally of $45 on the Jan or $26 on the July (assuming the $16 basis).